GM chief: 'Business is doing better'

In bankruptcy court testimony, Henderson says swift process is helping the troubled automaker.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Aaron Smith, CNNMoney.com staff writer

Photos
American cars: Red, white and cheap
A bad economy and crumbling auto sales have created absurdly low prices for some truly great American cars.
How will the economy fare in the second half of 2009?
  • It will get worse
  • It will get better
  • It will stay about the same

NEW YORK (CNNMoney.com) -- The head of General Motors, seeking swift approval of a plan to leave the automaker's debt behind, told a bankruptcy court Tuesday that the company's June sales are stronger than expected -- in part because the bankruptcy process is going swiftly.

"Business is doing better for a number of reasons, one of which being that this process will be quick," GM (GM, Fortune 500) chief executive officer Fritz Henderson told a hearing in New York that could determine if the plan is approved.

The Detroit-based automaker, which filed for bankruptcy court protection on June 1, is trying to win approval to create a new company and shed crushing debt and expensive contracts. The company hopes to get the plan approved by Thursday -- and may get an OK as early as Tuesday.

Under the plan, U.S. taxpayers would end up owning 60% of the new GM, with other stakes held by Canadian governments, bondholders and the United Auto Workers union.

Holders of $27 billion in GM bonds would get stock in the reorganized company, as will a union-controlled trust fund that will take stock rather than the $20 billion in cash it had been owed to pay future retiree health care costs. Those 650,000 retirees will have their coverage reduced.

GM plans to close more than a dozen factories, drop U.S. brands and shut down up to 40% of its network of 6,000 dealerships.

A successful and swift move through bankruptcy is crucial to GM's restructuring and a key test of the Obama administration's efforts to rescue GM and Chrysler.

Chrysler's bankruptcy was approved on June 1, just hours before GM entered Chapter 11. An attempt by creditors to block the Chrysler bankruptcy was turned back by the U.S. Supreme Court.

On Friday, in a move that could smooth its restructuring, GM filed documents in U.S. Bankruptcy Court in New York saying that it had agreed to accept legal responsibility, post-bankruptcy, for drivers who are injured by vehicle defects in old cars.

General Motors is trying to turn itself around amid slumping auto sales and a severe recession.

In 2008, GM announced its largest-ever annual loss of $38.7 billion. The company has $27 billion in debt. In May, its stock slipped below $1 a share for the first time since the Great Depression.

Lawyers representing a variety of claims against GM -- including asbestos-related and consumer -- subjected Henderson to a barrage of questions in testimony before Judge Robert Gerber. They wanted to know why clients had been left behind in the bankruptcy process.

Henderson said the decision to leave the claims out of the bankruptcy process was concluded during negotiations with the U.S. Treasury.

This prompted Sander Esserman, a lawyer from the Dallas-based firm of Stutzman, Bromberg, Esserman & Plifka representing GM brake line mechanics, to ask, "Isn't the new GM the same as the old, without assuming old liabilites?"

Henderson denied that, saying "Our new business has a new capital structure." But Esserman noted that the offices would remain the same with the new company, along with many of the employees and possibly the leadership. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
For sale: Steve McQueen's 1967 Ferrari The red 1967 sports car is expected to fetch millions at auction. More
The 13 most WTF gadgets From the weird to the gross, these 13 gadgets will make you wonder why they even exist. More
Best-loved cars in America These cars and trucks topped J.D. Power's APEAL survey, which measures how much owners like their new vehicles. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.